ADB to Help Nepal Improve Local Governance, Community-Led Development

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is helping Nepal improve local governance and promote community development through a program grant of $106.3 million.

The grant, which will be disbursed in three tranches, will support the active engagement of communities in local governance and improve resource management and service delivery by local government agencies.

The post-conflict Nepal government is moving towards a federal form of government, with the Three-Year Interim Plan (FY2008-2010) calling for decentralization as the main means for good governance.

“The grant will support the government’s move to improve local service delivery through strong local bodies and engaged and strong community organizations,” said Gambhir Bhatta, Senior Governance Specialist at the South Asia Department. “In the medium term, this is expected to bring good local governance, and ultimately, inclusive development.”

The program will increase the involvement of women, as well as caste, ethnic, and minority groups in the local governance process.

The program will also undertake new ways of monitoring local finances by incorporating gender equality and social inclusion indicators; administering safety nets and social assistance programs to the poorest people; budgeting grants to education, health, and agriculture sectors; and testing coordination with other districts.

The overall program is estimated to cost $470 million, with the Nepal government contributing $260.8 million. The rest will come from other development partners, such as the Canadian International Development Agency (which will provide its support through a co-financing arrangement with ADB), United Kingdom’s Department for International Development, the Swiss Agency for Development and Cooperation, the governments of Denmark and Norway, and several United Nations agencies.

The first tranche of the ADB grant, not exceeding $20 million, will be disbursed upon grant effectiveness. The second tranche, not exceeding $45 million, will be disbursed upon finalization of the joint financing arrangement between the Government and development partners and upon fulfillment of specific policy actions. The third tranche, not exceeding $41.3 million, will be disbursed within 12 months after the second tranche.

A follow-up ADB program grant of $50 million is being considered for 2012 to 2015. The grant will focus on policy reforms such as business process reengineering to support a federal government structure, putting in place the legal framework for proper local governance, and strengthening the fiscal transfer process and system.

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